Towards a new airport retail consumer, commercial and contractual landscape

The APAC Dialogue webinar, hosted by APTRA in association with The Moodie Davitt Report, examined the airport retail consumer, commercial and contractual landscape in the wake of the pandemic. We present edited highlights in words and video.

Plotting a new path forward for travel retail in the post-COVID-19 era was a central theme of a compelling inaugural APAC Dialogue webinar, hosted on 17 March by the Asia Pacific Travel Retail Association (APTRA) and The Moodie Davitt Report. It attracted well over 400 delegates and examined the airport retail consumer, commercial and contractual landscape in the wake of the pandemic. The event featured two major elements:

  • The opening keynote address ‘Emerging Stronger Together’ from Ms Lim Peck Hoon, Executive Vice President, Commercial at Changi Airport Group.
  • Discussion of some key findings of a new Trinity White Paper – ‘Travel Retail Wayfinding for the Post-Covid Era’ –co-authored by Mauro Anastasi of Bain & Company and Jack MacGowan of Castlepole Consulting in association with The Moodie Davitt Report.

Lim Peck Hoon

Mauro Anastasi

Jack MacGowan

Discussing the big picture themes were a powerful line-up of panellists comprising:

  • Doug Bagley: Managing Director Asia Pacific, William Grant & Sons
  • Dan Cappell: Chief Commercial Officer, Ontario International Airport Authority
  • Lucy Thomas: Head of Retail, Auckland Airport
  • Dag Rasmussen: Chairman & CEO, Lagardère Travel Retail
  • Sunil Tuli: President APTRA, and Group CEO, King Power Group, Hong Kong

Doug Bagley

Dan Cappell

Lucy Thomas

Dag Rasmussen

Sunil Tuli

Introducing the event on behalf of APTRA, Sunil Tuli said: “With the crisis continuing, we at APTRA felt it was even more important to maintain a dialogue, share ideas and face challenges together. Bringing members together is important and despite the current status quo, Asia Pacific remains the undisputed engine of the global travel retail industry. “So we wanted to set up a platform to discuss progress, to challenge ideas, and to learn from innovation that has taken place.” Changi Airport Group Executive Vice President, Commercial Lim Peck Hoon outlined how the Singapore hub had addressed the challenges of the pandemic, but also introduced a strong note of hope and optimism about the future. “2020 is over, we are still in the middle of the pandemic, but we remain deeply hopeful. We believe that the human desire to make face-to-face connections and the thirst for wanderlust remains strong and the demand for air travel will return.” Her full remarks can be found in the separate story in this issue. Mauro Anastasi and Jack MacGowan then outlined a stimulating and at times provocative view of the industry position, with a white paper featuring recommendations to follow soon. Setting the scene, MacGowan said: “It’s worth making the point that that the core benefits of the travel retail business are still very much there. Before this crisis this was probably the most exciting and fast-growing channel in the world.

Seeking a new way forward for the industry: The Bain & Company/Castlepole Retail paper

“We were starting to see new consumers with different attitudes and preferences coming into the channel, which began to bring change. But for many people there is still a deep need to connect, to explore, to travel; there’s the excitement of getting on a journey, the wow, when you walk into a great airport shop. And that excitement, those feelings have not gone away. And it is only a matter of time before we get back to doing what no other channel or no other retail can do, which is to deliver an emotional shopping experience, based on value, service and exclusivity.” Anastasi highlighted the influences on the channel of demographic change (younger consumers, Generation X and Y becoming dominant); the rise of online as a sales influencer; a reduced proportion of high spenders and the share of luxury sold within China to grow from around 30% pre-crisis to 50% post-crisis (displacing some spend from airports overseas to China domestic, they said). “This has implications for brands but also for airports and retailers as it is a shift from travel retail to China local,” said Anastasi. “So we will see different brands, different stores and different sales mixes. People want different products, not standard products. And we know that digital will have an even bigger influence. Pre-COVID we estimate that benchmarking via digital (Amazon, Alibaba etc) influenced around 10% of sales; in future this will be much higher, 30% or more.” The overall impact, he noted, will be compressed travel retail turnover in the coming years. “We see a return to 2019 sales by 2025 but it could take until 2030, with a much bigger omnichannel component,” said Anastasi. The changing face of the industry (new consumers, new products sold, future space allocation) will also have implications. “The cash generation of stores in airport retail will remain relatively low for the next three-plus years, and will of course depend on how many stores reopen. We will have to forget cash generation for the foreseeable future, which in turn will affect investment.”

“We will have to forget cash generation for the foreseeable future, which in turn will affect investment”

Bain & Company outlined its own view of potential industry recovery, with an uneven rebound. Asia intra-regional travel could be ahead of 2019 as soon as 2022, North America domestic and regional should recover next, but most other regions (including Europe, a key travel market) are likely to only hit 2019 numbers in 2025 or 2026. “Overall we estimate that we have lost one year compared to previous estimates,” said Anastasi. The likely delay in the return of long-haul travel until 2025/26 will also have a big impact on duty free & travel retail, based on the quality of passengers flying and structural change in the aviation market (fewer business travellers, less long-haul and more low-cost travel). The outlook for travel will also depend on how fast vaccine passports are rolled out, MacGowan noted, with mid-term recovery set to depend on how this concept is introduced and accepted. The authors of the white paper said that the shape of the airport business will change permanently, with even less aviation income (lower long-haul numbers, more LCCs) and more from non-aviation sources in coming years, although Anastasi noted that profitability could still mirror pre-crisis levels with adjustments to the business model.

How Bain & Company sees the trajectory of recovery by key region

“There will be a need for a change in strategies at airports, embracing competition and marketing, establishing new strategic partnerships. In non-aviation, we’ll need to redesign retail footprints to grow penetration. They will develop a new category and brand mix, with more convenience-focused F&B, a focus on omnichannel, with strategic control of core assets such as CRM and the digital real estate.” Further consequences of these dynamics will be a need for airports to balance customer service and losses in the reopening phase; active management of concessions; listening, testing and learning for the needs of a new consumer in order to optimise space allocation; building new retail capabilities and ensuring more flexibility and speed in planning cycles and new contracts. For travel retailers, this means overcoming issues of slow stock depletions; lower numbers of stores open and modest sales, but with capex still urgently needed to modernise real estate; a slowdown in passengers and the economy; facing up to new consumer behaviour and possibly eyeing opportunities for consolidation. “From the brands,” added Anastasi, “we see a move towards hyper-localisation and online. The local portion of luxury goods will move from 50% in 2015 to 65-70% by 2025. This is led by China but other markets too. So if you’re a brand, your priority will be maximising share of wallet among local consumers as well as online. Travel retail will be on the radar but will be less of a growth driver than before.”

The calls to action or ‘hard targets’ for the industry in its drive to return to 2019 business levels should include:

  • A focus on radically increased passenger penetration, given what Bain & Co expects will be considerable vacant space in terminals, combined with low profitability. The industry target should go from 10-20% penetration to over 30% on average where possible.
  • Better understanding of the consumer, and fast adaptation to new consumers. “Airports are a long-term, real estate player but how the consumer changes the way they shop is unknown as yet, so speed of adaptability is fundamental,” said Anastasi. “That has implications for how we plan our investments and allocate space.”
  • Moving to a fully data-driven commercial strategy, with dynamic pricing that responds to the ecommerce challenge and optimises range and promotional planning. “In domestic markets this is happening but for many in travel retail this is still to be done,” said Anastasi. “As a target we should have 90%+ of commercial decisions backed up by big data analytics. Amazon is at 99%; maybe we can be at 90%.”
  • Leveraging CRM better – to bridge the gap between travel retail and downtown.
  • Omnichannel tailored to travel retail – and a target of 25% of business driven by digital combined with physical interaction.
  • A rethink of the contractual structure. “It’s not simply a question of negotiating MAG,” said Anastasi. We are asking how can contracts best serve all parties?”
  • Repurposing travel retail capex so that in the new era, 50% of capex should be dedicated to digital, not physical, real estate. “This is what large, successful downtown retailers are doing and it will happen in travel retail,” said Anastasi.

“To do all this, we need an eco-system built on partnerships. We have seen the Dufry-Alibaba partnership in omnichannel and China. The market is saying this is very positive. Nobody can do all of this independently.” *See next page for discussion of these big picture themes from key industry partners.

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The Moodie Davitt eZine Issue 293 | XX March 2021

The Moodie Davitt eZine is published 15 times per year by The Moodie Davitt Report (Moodie International Ltd). © All material is copyright and cannot be reproduced without the permission of the Publisher. To find out more visit and to subscribe, please e-mail

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